Morgan Stanley Coffee Report - August 20, 2020

Arabica traded a reasonably quiet session, settling down 40 points at 118.95.  With notices out tomorrow, U/Z was perhaps the most interesting trade of the day, settling -0.40, up .50 points, while trading an intraday high of +0.35 (U over Z).  The 4526 spreads, 1967 EFPS, and other assorted odds and ends would seem likely to clean up the 5781 lots of OI entering the day, however it rarely works out that way.  The trading was orderly with access to milds, even those of a certain age, remaining prized.  Futures were fascinating even with a fairly low volume, low volatility session in the books.  KC was strong early, trading in positive territory even as the BRL weakened out to 5.66 before BCB intervention put the brakes on the FX atrophy, and the DXY strengthened.   As KC began to stumble, the dollar began to weaken and the BRL proved to be the more important currency cue.  Ultimately the BRL recouped much of its losses on the backs of a morning US$590M spot auction, 12,000 FX swaps rollovers, and a second US$550M spot auction post-KC close.  The day was fairly quiet FX and FND concerns aside, with volumes sliding by nearly a third across most measures vs Wednesday, structure tightening a modest 30 points on the 1 year curve in small increments, and certs declining 748 bags with pendings unchanged.  Robusta was similarly uneventful with X settling a dollar higher at 1385.  U/X remains historically elevated, settling $5 stronger to +72 after peaking at +79 intraday.